Top-level corporate executives such as CEOs and CFOs tend to have an information advantage over other investors. If these high-level insiders are buying company stock, it’s generally a bullish development.
Here, we are going to highlight a large CEO purchase at Linamar Corp (LNR:CN). Linamar Corp is a Canadian auto components company. It designs, develops and produces engineered products in North America, the Asia Pacific, and Europe. It operates via two segments, Transportation and Industrial. It’s listed on the Toronto Stock Exchange and currently has a market capitalization of CAD $4.4 billion.
Linamar Corp: insider buying
Regulatory filings show that on 14 December the CEO of Linamar Corp, Linda Hasenfratz, purchased 50,000 LNR shares at a price of CA$67.82 per share. This purchase – which cost the insider approximately CAD $3.4 million – boosted her holding by just over 33%.
This CEO purchase is very interesting because of its large size both in monetary terms and relative terms – it has increased Hasenfratz’s holding by over 30%. Our data shows that she increased her holding by a much smaller amount in April of this year at levels around 50% lower than the $67.82 she paid for stock on 14 December, which gives a strong signal to investors that she is very confident that there is value in the share price at current levels. It’s worth pointing out that Hasenfratz has been at Linamar Corp for over twenty years which would suggest that she knows the company extremely well.
Linamar Corp saw normalized earnings rise significantly in Q3 compared to the prior year. They came in at CAD $197.4 million compared to CAD $139.2 million in Q3 2019. Cost cutting meant that this increase in earnings was achieved despite lower revenue. As a result of an increase in free cash flow the board doubled the dividend for Q3 to CAD $0.12 per share. The CEO said: “We continue to be vigilant around costs and cash, risk mitigation and driving market share growth as our recovery continues.”
On the back of this news, we see the insider purchase here as bullish. It suggests that the CEO feels the recovery will continue and that the current share price does not reflect Linamar Corp’s true value.